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The Shareholder Forumtm

special project of the public interest program for

Fair Investor Access

Supporting investor interests in

appraisal rights for intrinsic value realization

in the buyout of

Dell Inc.

For related issues, see programs for

Appraisal Rights Investments

Fair Investor Access

Project Status

Forum participants were encouraged to consider appraisal rights in June 2013 as a means of realizing the same long term intrinsic value that the company's founder and private equity partner sought in an opportunistic market-priced buyout, and legal research of court valuation standards was commissioned to support the required investment decisions.

The buyout transaction became effective on October 28, 2013 at an offer price of $13.75 per share, and the appraisal case was initiated on October 29, 2013, by the Forum's representative petitioner, Cavan Partners, LP. The Delaware Chancery Court issued its decision on May 31, 2016, establishing the intrinsic fair value of Dell shares at the effective date as $17.62 per share, approximately 28.1% more than the offer price, with definitive legal explanations confirming the foundations of Shareholder Forum support for appraisal rights.

Each of the Dell shareholders who chose to rely upon the Forum's support satisfied the procedural requirements to be eligible for payment of the $17.62 fair value, plus interest on that amount compounding since the effective date at 5% above the Federal Reserve discount rate.

Note: On December 14, 2017, the Delaware Supreme Court reversed and remanded the decision above, encouraging reliance upon market pricing of the transaction as a determination of "fair value." The Forum accordingly reported that it would resume support of marketplace processes instead of judicial appraisal for the realization of intrinsic value in opportunistically priced but carefully negotiated buyouts.

 

 

For earlier articles about possible objectives of orchestrated negotiations and "stalking horse" arrangements, see

 

Source: Fortune (CNN Money), March 27, 2013 article

Term Sheet  The latest on private equity, M&A, deals and movements — from Wall Street to Silicon Valley

 

Exclusive: Dell paying Blackstone's bills

FORTUNE

By March 27, 2013: 8:13 PM ET

 

dell_sign_headquarters

 
   

PC maker reimbursing due diligence costs for potential buyers.

FORTUNE -- Dell Inc. is reimbursing The Blackstone Group's due diligence costs on a possible buyout offer for the company, Fortune has learned.

Sources close to the situation say that Blackstone (BX) repeatedly requested the concession, threatening to otherwise walk away from the table during the "go-shop" process. Dell's (DELL) special committee eventually favored the move, believing that it would increase the odds of getting a superior offer.

But some on the special committee also thought it may require approval from Silver Lake and Michael Dell, who had offered in February to buy the company for $24.4 billion. After all, the winning bidder would be on the hook (albeit indirectly) for such payments.

Silver Lake agreed to the request, perhaps because expense reimbursement would be cheaper than defending legal accusations of impeding a competing bid. But Silver Lake added a twist, asking that its group also be reimbursed for sunk transaction costs (which would be in addition to the already agreed-upon termination fees, were it to lose the deal). It also asked that the ceiling for both agreements be $25 million. The special committee agreed.

Carl Icahn neither asked for, nor received, a similar deal.

Such reimbursement arrangements are unusual, but not unique. Occasionally they are contingent on the rival suitor (i.e., Blackstone) making a formal bid, but that is not the case here.

"If you're trying to get a higher bid for a $24 billion or $25 billion company, offering up $25 million probably doesn't seem like too steep a cost," explains a private equity executive who isn't involved in the Dell process.

Another buyout pro adds that private equity firms easily could bump up against the $25 million figure on such a complex transaction, after paying for accountants, lawyers and a third-party consulting study. He added: "It basically gives Blackstone extra time to make up its mind, without it costing them a dime. Free option."

Spokesmen for The Blackstone Group, Silver Lake Partners and the Dell special committee declined to comment.

© 2013 Cable News Network. A Time Warner Company.
 

This project was conducted as part of the Shareholder Forum's public interest  program for "Fair Investor Access," which is open free of charge to anyone concerned with investor interests in the development of marketplace standards for expanded access to information for securities valuation and shareholder voting decisions. As stated in the posted Conditions of Participation, the Forum's purpose is to provide decision-makers with access to information and a free exchange of views on the issues presented in the program's Forum Summary. Each participant is expected to make independent use of information obtained through the Forum, subject to the privacy rights of other participants.  It is a Forum rule that participants will not be identified or quoted without their explicit permission.

The management of Dell Inc. declined the Forum's invitation to provide leadership of this project, but was encouraged to collaborate in its progress to assure cost-efficient, timely delivery of information relevant to investor decisions. As the project evolved, those information requirements were ultimately satisfied in the context of an appraisal proceeding.

Inquiries about this project and requests to be included in its distribution list may be addressed to dell@shareholderforum.com.

The information provided to Forum participants is intended for their private reference, and permission has not been granted for the republishing of any copyrighted material. The material presented on this web site is the responsibility of Gary Lutin, as chairman of the Shareholder Forum.

Shareholder Forum™ is a trademark owned by The Shareholder Forum, Inc., for the programs conducted since 1999 to support investor access to decision-making information. It should be noted that we have no responsibility for the services that Broadridge Financial Solutions, Inc., introduced for review in the Forum's 2010 "E-Meetings" program and has since been offering with the “Shareholder Forum” name, and we have asked Broadridge to use a different name that does not suggest our support or endorsement.